Where does the government borrow billions from?

How does the government borrow money?

The government borrows money by selling bonds.

A bond is a promise to pay someone money in the future. Most bonds also require the borrower to make regular interest payments until the repayment date.

So it’s basically an interest-paying “IOU”.

Government bonds – known as “gilts” – are appealing because they are seen as very safe, with little risk that the money won’t be repaid.

Gilts are mainly bought by financial institutions, such as pension funds, investment funds, banks and insurance companies, from the UK and abroad.

Private savers also buy some.